LOSSPR
Measure the probability of loss at throughout an investment horizon (first-passage time) or at the end of horizon.
Description
Probability of loss is a measure of the likelihood that a portfolio will incur a particular percentage of loss at the end of an investment horizon. The function is also able to calculate the within-horizon probability of loss which is estimated as a first-passage time probability.
See https://insights.windhamlabs.com/insights/rethinking-exposure-to-loss for an introduction to stress testing your portfolios and assessing a more realistic measurement of exposure to loss.
Syntax
The following describes the function signature for use in Microsoft Excel's formula bar.
Input(s)
| Argument | Description |
|---|---|
mu | Required. Vector / scalar of portfolio return estimate(s). |
sigma | Required. Vector / scalar of portoflio risk estimate(s). |
horizon | Required. Investment time horizon in the same time units of mu and sigma. |
threshold | Required. Loss threshold to assess likelihoods. |
estWithinHorizon | Optional. Logical flag (TRUE or FALSE) to indicate whether you would like to calculate the within-horizon risk measurement. If this argument is not specified, it defaults to false. |
Output(s)
Probability of loss estimate(s).
Example
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